Wisconsin to consider $3 billion Foxconn incentive package

By David Shepardson

4 Min Read

Foxconn Chairman Terry Gou (C) looks on as U.S. President Donald Trump (R) shakes hands with Vice President Mike Pence (from L), Wisconsin Governor Scott Walker and House Speaker Paul Ryan (R-WI) (L-R) at the end of a White House event where the Taiwanese electronics manufacturer announced plans to build a $10 billion dollar LCD display panel screen plant in Wisconsin, in Washington, U.S. July 26, 2017.Jonathan Ernst

WASHINGTON (Reuters) - The Wisconsin governor ordered the state legislature back into special session on Tuesday to consider an incentive package that would award Taiwanese electronics manufacturer Foxconn $3 billion over 15 years in mostly cash incentives and waive several state environmental reviews.

Foxconn said last week in a White House ceremony it plans to build a $10 billion LCD flat screen factory in southeast Wisconsin.

The company, formally known as Hon Hai Precision Industry Co Ltd (2317.TW), hopes to open the 20 million-square-foot plant in 2020 at a 1,000-acre site and will initially employ 3,000 people. Republican Governor Scott Walker and Foxconn said the company ultimately may employ 13,000 people at the site.

The draft bill released Monday discloses new details of the expensive incentive package that Wisconsin offered as it competed with six other states to land the project that it says will also generate 22,000 ancillary jobs and 10,000 construction jobs.

The Republican-controlled legislature will take up the measure on Tuesday but it is not clear when they will vote. If the incentives are approved, the Wisconsin Economic Development Corporation would then negotiate a formal contract with Foxconn on the project, said Mark Maley, a spokesman for WEDC.

Tim Bartik, an economist at the Upjohn Institute for Employment Research in Michigan who studies government tax incentives, said the Foxconn package is at least six times the average U.S. award but similar to some deals for auto plants and planemaker Boeing Co (BA.N).

Foxconn is a major supplier to Apple Inc (AAPL.O) for its iPhones but the company has not said if the Wisconsin factory would produce any parts for Apple.

Under the legislation, Foxconn can receive up to $200 million per year in refundable tax credits, capped at $2.85 billion if meets capital and employment compensation targets. It can also avoid paying $150 million in sales taxes on building materials, equipment and supplies.

Although the state measures to attract Foxconn are labeled tax incentives, they largely would be paid in cash since the effective Wisconsin state tax rate is 0.4 percent on manufacturers.

In addition to incentives, President Donald Trump suggested the investment decision was due to his election and promised changes in corporate regulatory and tax policy.

The incentives include up to $1.5 billion in state income tax credits for job creation and up to $1.35 billion in state income tax credits for capital investment. Foxconn is eligible for additional local incentives.

The company is eligible for refundable tax credits equal to 17 percent of wages paid instead of the typical 7 percent and 15 percent of capital costs instead of 10 percent.

Wisconsin also agreed in the draft legislation to issue up to $252.4 million in state debt to reconstruct parts of Interstate 94 near the sites that the company is considering sites in Kenosha and Racine counties near the border with Illinois.

The draft legislation released by Walker waives a required state environmental impact statement and allows the company to discharge dredged or fill material into some wetlands without state permits. The legislation also would allow Foxconn to connect artificial bodies of water with natural waterways without state permits.

Foxconn Chairman Terry Gou told the Milwaukee Journal Sentinel that one reason Wisconsin was appealing is because of its proximity to abundant fresh water from Lake Michigan needed to build panels.

The legislation also waives requiring approval for the project by the Public Service Commission, which oversees power and water utilities in Wisconsin.